Maryland Hospitals Go All-In on Reducing Total Cost of Care

For the past 40 years, Maryland has had a unique healthcare payment system in which all commerical payers reimburse hospitals at the same rates that get set by Maryland’s Health Services Cost Review Commission (HSCRC). Then, in 2014, due to rising healthcare costs and high readmission rates, the state entered into a five-year agreement with the Centers for Medicare & Medicaid Services (CMS) to include Medicaid and Medicare in its All-Payer system, with the goal of keeping cost increases below Medicare growth.

Under the setup, all payers in the state set annual global budgets for hospitals to cover both inpatient and outpatient care. The idea is that the fixed revenues would hold hospitals accountable for the total cost of care since the number of admissions does not change the global budget, and thus, providers would be incentivized to engage in care management and population health management efforts designed to keep patients out of the hospital, when necessary.

The Maryland All-Payer model agreement established a five-year period during which a series of key financial and quality improvement requirements must be met. The program was voluntary, but within a short period of time, every hospital in the state had signed up. A 2018 report from the HSCRC that analyzed the first three calendar years of the model found, as reviewed closely by research and consulting firm The Advisory Board, that by the end of 2016:

• Medicare cumulative savings in total cost of care were $461 million, 2.08 percent below the national average growth rate;

• Maryland hospitals had reduced the gap between state and national Medicare readmissions by 79 percent, and are on target to close the gap this year;

• Per-capita hospital spending grew by 1.53 percent, below the 3.58 percent cap that was initially set;

• 100 percent of Maryland’s hospital revenue has already moved under the global budget system, exceeding the goal of moving 80 percent of hospital revenue under this system by 2019;

• The program generated $586 million in Medicare hospital expenditure savings, already exceeding the five-year goal; and

• The rate of potentially avoidable hospital-acquired conditions fell by 44 percent, exceeding the 30 percent reduction target.

Given the success the model has had thus far—having met or exceeded each of the targets initially set—last year CMS approved the state’s proposal to extend its All-Payer model for another five years and expand the program beyond hospitals to settings such as some physician practices, skilled nursing facilities and other non-hospital organizations. Under this expansion, which started January 1, the new program will be called the Total Cost Of Care model.

Because hospitals in Maryland operate under this unique payment model, it has become easier to focus on wellness and population health, Redonda Miller, M.D., president at Baltimore-based The Johns Hopkins Hospital, stated on a panel at the World Health Care Congress in Washington, D.C. earlier this year. “It doesn’t matter if I, as a physician, take care of fewer or more patients; the revenue I receive is [pre-determined],” she said. “Why would the state do this?” Miller asked. “The idea is to keep people out of the hospital, and we embrace that. We’re focusing on improving post-acute care strategies and reducing emergency room visits.”

Katie Wunderlich, executive director of the Health Services Cost Review Commission, says that although this data from CMS is not yet official, through the end of 2017, under this model, the state will have already saved $916 million in cumulative savings, with preliminary cumulative savings for the end of 2018 reaching $1.4 billion. “We have far surpassed the savings [targets] and have saved the federal government a lot of money in hospital expenditures,” Wunderlich says.

Tech at the forefront

For the expanded model that begins this year, Wunderlich says she wants to make sure that the incentives the HSCRC puts together in its regulatory structure do incentivize hospitals to reduce the total cost of care, but also to coordinate care between themselves and their upstream and downstream partners. “They [should be] sharing data and resources, and doing risk profiling so they can help maintain the health of their populations and manage total cost of care growth,” she says. Indeed, as state leaders continue to glean the data, it’s become clear that there has been a shift in volumes out of hospitals, she adds.

“This is ideally what the global budget is designed to do for hospitals; the idea is to appropriately move volumes to lower-cost settings outside of the hospital while maintaining quality. The whole purpose is to incentivize that,” says Chris Peterson, principal deputy director at the Health Services Cost Review Commission. “We have seen hospitals build urgent care clinics next door to the hospitals and people are going to those urgent care clinics. That’s not what you see in other states, but it’s the behavior we explicitly want to see and are encouraging here,” he says.

Wunderlich points out the importance in hospitals proactively connecting with community providers about ways to reduce emergency department (ED) volume appropriately. To this end, the state’s designated health information exchange (HIE), the Chesapeake Regional Information System for our Patients, or CRISP, has provided a shared technology infrastructure to aid in those efforts. The HIE’s officials note that CRISP has connected with all the acute care hospitals in Maryland, allowing each of the networked providers to send and receive important patient data that is necessary to succeed in the state’s payment model.

“The [All-Payer] model is supposed to create financial motivations for healthcare providers to keep people healthy and out of the hospital, but it’s difficult to do that as a facility that is just providing acute care services. You need to be cooperating with other providers in the community, and to do that, you need some amount of technology cooperation,” says David Horrocks, CRISP’s president and CEO.

Two key sources of information that go back-and-forth from the HIE to Maryland providers are clinical data and encounter data. The basic encounter data is used to build care team information for patients, so that when patients arrive at a particular hospital or have a particular care manager, the clinician or care manager can see who else is on their care team, via the HIE’s dashboard that gathers that information and displays it in one place, Horrocks explains. “If you are going to coordinate care, the most basic thing you need to understand is knowing who you are coordinating with,” he says.

Beyond that, CRISP also manages data from HSCRC itself, which essentially possesses an all-payer claims database for the state’s hospitals. This database is used to provide information to care managers, which can become quite relevant for making decisions about individual patients, Horrocks says. What’s more, “care alerts” are created by clinicians, which in essence are quick notes that contain pertinent patient information, such as contact information or medication restrictions. Those alerts are instantly displayed in the clinical query portal within a patient’s CRISP profile, and then delivered right into the hospital’s electronic health record (EHR), Horrocks explains.

Can other states replicate this model?

What Maryland has been able to accomplish under this All-Payer model has gotten significant attention around the country, but questions remain over how replicable it is, state-to-state. It’s the only state in the country that operates under this type of payment system for all its hospitals, though Pennsylvania has adopted global budgeting for rural hospitals. Earlier this year, the Pennsylvania Department of Health announced that the initiative is starting out with five participating hospitals, with the hope of increasing the participants to 30 by 2021.

Interestingly, a few recent studies that examined how rural hospitals in Maryland fared in the global budget model in its earlier years did not find significant reductions in inpatient and ED use, or that the program had reduced readmissions or improved coordination between hospitals and primary care providers.

One reason for this, according to Eric Roberts, Ph.D., assistant professor of health policy and management at the University of Pittsburgh Graduate School of Public Health, is that the program is designed for hospitals and not physicians. “While the model placed spending in each hospital under an annual all‐payer budget, it was not truly ‘global’ in that it did not include spending incurred by physicians or on services provided outside of the hospital, (hospitals account for 45 percent of non‐drug medical spending in Maryland), and because only hospitals bore direct risk for spending and outcomes,” said Roberts, who wrote an editorial accompanying a Health Services Research study on this issue.

However, in the years to come, via the extension that came last year from CMS, it’s expected that many more non-hospital providers will be part of the model. “We only regulate hospitals under our authority, but of course we don’t want our health system transformation to stop there. We want to engage all of our upstream and downstream providers,” says Wunderlich.

For instance, in the All-Payer model, incentives were created for hospitals to share resources and data with state physicians, specialists, nursing homes and others, and that work “needs to continue for the sake of patients to keep them healthy before they come into the hospital,” Wunderlich adds. And when there is a need for an acute care episode, “Hospitals need to strengthen the discharge process and other follow-up coordination to make the delivery system more streamlined so that providers can identify patients who are high-risk and share best practices with each other. That care coordination infrastructure will need to continue to get built up,” she says.